What Does Katerra Mean for the Future of Specification?

One single event in 2015 radically changed a multi-trillion dollar industry and, more importantly, the way companies get their products sold, distributed and specified: the birth of Katerra—a radical new breed of building company.

Katerra defines itself as a technology company that optimizes building development, design, and construction. To appreciate the scope of what they offer, think of every single step it takes to execute a building project—then streamline it. From a team of award-winning designers and engineers to hyper-efficient factories (with a goal of 6 in the U.S. alone), building panels, sourcing partners, project managers, labor, on-site finishers and products—from timber to tile—without the distributor markup, Katerra has been designed to disrupt.

Since its inception in 2015, Katerra has grown and matured as both a company and a brand.

Accumulated more than $1.3 billion in bookings for new construction, spanning the multi-family, student and senior housing, and hospitality sectors*

Amassed a global team of more than 1,300 people, attracting senior leadership and talent from groundbreaking technology brands such as Apple, Google, HP, Nokia, Sandisk, and Flextronics*

Opened a fully operational manufacturing facility in Phoenix, AZ with a roadmap in place for multiple additional domestic factories, including breaking ground on a mass timber factory in Spokane, WA.*

“Why should I care?,” you may be asking to yourself. I’m here to tell you: Katerra is relevant because the building industry has been static for too long. Up until now, projects have been approached as prototypes—unique designs built from the ground up—making construction expensive and time-consuming. And while many have tried, no one has affected serious, industry-altering change to the way we build—no one until Katerra, that is. With a Silicon Valley mindset and support from multinational SoftBank investors, Katerra is turning the industry on its head, delivering a higher quality product faster, with less waste, and at a lower cost.

Every aspect of the company is focused on industry disruption, even the type of money they are able to secure. SoftBank’s Investment Advisers is an international advisory firm specializing in the technology sector that, in their own words, “focus[es] on growing businesses run by disruptive innovators...seeking to be the foundational platforms of the information revolution.”

Katerra has a Silicon Valley mindset—specializing in technology, systems and supply chain innovations. These minds are unencumbered by the traditional restrictive thought—they don’t have a reference of what has been deemed “impossible.” For them, the sky’s the limit. When asked what failure would look like, Co-Founder Fritz Wolff boldly responded, “It would look exactly like today.” Ouch.

Kattera is your customer, distributor and competitor all rolled into one.

Katerra is a revolution.

“We are applying systems approaches to remove unnecessary time and costs from building development, design, and construction. With the latest technology at our fingertips, efficiency no longer has to come at the expense of quality or sustainability.”**

The only thing slowing the impact of Katerra is that it can’t grow fast enough to meet demand.

What does Katerra mean for the future of your specification?

The channel distribution process is turned upside down.Katerra buys direct. When a developer is working a project, Katerra will jump right over the distributor and buy the specified materials and products directly from the manufacturer, allowing them to realize substantial cost savings. But Katerra will also act as a distributor, selling directly to construction companies. They’ve got the best of both worlds.

Consolidation among supplier brands.Walmart drives product pricing through volume. Katerra is looking to take a page from their playbook. Does this mean brands don't matter? Not at all—Walmart needs to offer Samsung to stay relevant in electronics. But it's also true that with fewer distribution channels, some consolidation among suppliers will occur—and strong, trusted, established brands will come out on top. Why? Because a company that invests heavily in its brand cannot be replaced. Consumers (and developers) will continue to ask for Kohler by name, and there’s no doubt Katerra will deliver.

What happens to margins?Pricing will be impacted by two realities: 1) By eliminating the middleman, Katerra is able to win immediate cost savings; and 2) Suppliers that are eager to make large volume sales will be tempted to lower their pricing to win the business. But ultimately, if consolidations in the market do happen, the winners are likely to be those product companies that stay true to their brand by demanding the price that ensures they can continue to deliver quality.

Private label becomes an option.Another opportunity for building material and architectural product companies is to offer private label products under the Katerra brand for the projects that don’t require or value a name brand. Katerra is going to look at a product or material to see if they can have something similar made cheaper. Who better to do it than an established manufacturer who specializes in the product?

Now is the time.When Walmart and Amazon emerged into the market, some consumers continued to buy using traditional retail channels—a fraction still do so today. Retail has been forever impacted by these two giants. Katerra will do for building what Apple did for personal devices—and Amazon for purchasing books—change it forever. Now is the time to figure out how your company will fit into the way Katerra does business. Those who take a wait-and-see approach will be left behind faster than imaginable. By 2021, the built environment will look radically different—that’s a promise.

Want to know where Katerra’s multifamily designers are looking for inspiration? Click the link below to check out our 2018 Hospitality Trend Report. Why? Multi-family and residential designers rely on hospitality to show the future.